You know the great respect and affection that I will always
have for General Electric and its great people.
—Tom Paine to Reginald Jones, CEO of General Electric, in 1976
“I must say that I would … be willing and even anxious to return to Washington at some time if there were some need at the national level for my talents. The job at the moment is maybe to get myself on a little better financial footing.” He was talking to Robert Sherrod, the longtime Time Life journalist who was in New York to interview him. A year had passed since Tom Paine left NASA and the tangos inside the Washington Beltway. From behind his antique mahogany desk, he looked out the window at the sprawling skyline, the concrete and steel high rises, and the taxi-filled streets of Midtown Manhattan thirty-eight stories below. Thirty Rockefeller Plaza was a long way from Federal Office Building Six. The landmark Art Deco skyscraper that was now his office was home to the Radio Corporation of America and General Electric. Leaning back in his chair, he had no problem telling Sherrod that it was “a lush job.”1
Months earlier, he and Barbara had moved to East 56th Street, just a few city blocks away. General Electric, his old company, had wanted him back. In the summer of 1970, he was still deeply immersed in working the return-to-flight issues following the Apollo 13 failure when he received a surprising, unsolicited job offer from the Xerox Corporation. It was a very generous offer from the Fortune 100 document technology products company. He did not want to just say yes or no, but it got him thinking. Greta was in college, and George, Judith, and Frank were all in private school. “It makes you feel good inside, … reassured that you are still respected.”
He picked up the phone and called Jack S. Parker, the vice chairman of the board of General Electric and an old friend. Was there anything at GE that he might perhaps consider before responding to Xerox? As a matter of fact, there was, Parker told him. He quickly put Paine in touch with Fred J. Borch, GE’s chairman of the board. Borch, on the other end of the line, offered him the opportunity to head up all of the company’s worldwide electric power generation businesses.
While still a premier global corporation, General Electric in 1970 was in the midst of an unprecedented period of instability, mergers, and divestitures. One big problem it was struggling with was the acute shortage of top management people. There was, in particular, almost no one in Paine’s age bracket with his high profile, experience, and qualifications. The global high-tech conglomerate also had recently made some highly publicized and openly unprofitable moves in its nuclear power business, moves that were roundly blasted by critics in the industry. The worst thing was that Westinghouse and Babcock & Wilcox, its chief rivals, had won some major legacy contracts away from GE. The company needed to make a change.
Borch’s offer appealed to him on several key levels: it was in the field of engineering and technology, dealt with aspects of energy production, and had nothing to do with outer space. “One of the strictures I put myself in was that I would work outside the aerospace area,” he said. “I did not want to be put in the position of talking business with the people I once worked with.”2
He told Borch that it might be best if he waited until at least early the following year so he could continue to try and make the case with the White House to support his post-Apollo plans. With Apollo 14 scheduled for January of 1971, that would also allow him to still be at NASA when Project Apollo returned to flight. But Borch needed someone to step in that summer. Hubert W. Gouldthorpe, the vice president and group executive of power generation, was stepping down. Paine finally told Borch yes, but to give him three more months. He would leave NASA and make himself available by the first of October.
General Electric Power Generation was the industry’s standard-bearer in the world of electricity. As the largest power generation business in the world, it employed some 38,000 people on five continents. With worldwide manufacturing and licensing agreements, GE had produced, in the years since World War II, $1.5 billion worth of power generation equipment. Its long history of working with turbines had also made it into a world leader in the manufacture of jet engines.
GE presented Paine with a big challenge. The energy crisis had been brewing for years. Now it was replacing Vietnam in the national headlines. Circumstances would take an abrupt turn for the worse with the 1973 OPEC oil embargo that would force the price of imported crude oil to triple virtually overnight. This affected nearly every sector of life, from manufacturing to food processing, housing, and of course, transportation. Long lines of cars unlike any that had been seen before appeared at gas stations across the country. The automobile industry changed for good. More fuel-efficient compact vehicles replaced the large luxury sedans that came out of Detroit. Environmental activism, too, gained momentum, and had become quite vociferous by the early 1970s. Efforts to develop clean air and clean energy drove nearly every facet of engineering, research, development, and manufacturing.
Paine quickly settled into his new job. In 1971 and through 1972, he came up with a strategic plan that he believed would help confront the energy crisis head-on (and increase GE sales in doing so). It began with expanding the technical diversity of General Electric in a time of national need. He put more company dollars into research and development in the advanced technologies of coal gasification and hydrogen fuels. Properly developed, they could provide an environmentally friendly way for the US to decrease its reliance on fossil fuels. He wrote to the White House and recommended that the Nixon administration open up new domestic and offshore drilling. A key component of the plan, he told Nixon, was to construct the Alaskan oil pipeline (now called the Trans-Alaska Pipeline System).3
His other objective was to expand GE’s nuclear power market even in the midst of the heated opposition by antinuclear activists and scrutiny from the political left. He spoke to the industry regularly about the need for the country to increase its dependence on nuclear power based on its clean track record and reliable scientific principles. The best way was to start cutting down on federal government procedures, rules, and regulations. Once that happened, more power plants should be put on the country’s power grid as quickly as possible. Critics publicly challenged him in the New York press and business publications. But he maintained that nuclear power was the way to go. It was by far the most proven and affordable form of clean energy available.4
On a trip to Santa Barbara, he met with Philip Luttenberger, the new manager of TEMPO. He had an important task in mind for his old group. Could they, he asked Luttenberger, come up with a working plan to develop an integrated electric power and water supply for the entire North American continent that, when implemented, would be viable to the year 2000? If successful, such a plan would give the company a huge advantage over the other power companies, making it possible for GE to grasp the market and help guide the country out of the energy quagmire using the commercial sector.
TEMPO met his challenge. Luttenberger’s group gave him a comprehensive plan that was very detailed and, he believed, marketable. It proposed ways that General Electric Power, working with its suppliers, could aggressively increase research and development on new sources of energy such that they might be ready for use by the early 1980s. An incremental buildup would continue the growth to meet the sharp rise in consumer demand that was expected through the end of the twentieth century. Accompanying this would be changes in federal government regulations concerning the development and mining of new resources. The timing of the plan was perfect. It was ready to take to the White House, and he proposed it to the new Federal Energy Administration (later the Department of Energy) that President Nixon created in May 1974.5
In the spring of 1973, he directed GE to put more money directly into the research and development of synthetic fuels. By his estimation, “synfuels” held many answers for the energy crisis. Prospects for the artificial fuel sources, he said, were so promising they could extend “across the entire non-electrified energy spectrum, from home heating and the clean production of steel and fertilizer to auto and jet fuels.”6 This was not a trade secret. It was a well-established position throughout the industry that the first to achieve a breakthrough and make synfuels profitable would hit a “gold mine” in returns. The company was cash strapped, however; the board of General Electric did not agree with him and were much more tepid in their enthusiasm. But a potential breakthrough would have a multitrillion-dollar impact on global power generation. He maintained that it was the right thing to do in a time of national crisis, and kept the investment programs moving.7
Energy was the top domestic concern of the country in the early 1970s. Economic stagflation had hit the United States hard, and the same was happening in other parts of the industrialized world. The US was the greatest consumer of energy in the world at the time. Scientists projected that with population growth, annual energy requirements would more than double by the year 2000.
President Nixon was by then mired in the Watergate scandal; criminal investigations had already been underway for the better part of a year. But the president still had to address the issue of energy. On June 29, 1973, Nixon created the Office of Energy Policy. Its first priority was to implement a national policy to tackle the energy crisis. A few weeks earlier, Paine had received a call from Peter Flanigan. The White House wanted to know if he was interested in the job as the nation’s first Energy Czar.8 They discussed the matter on subsequent occasions, and Flanigan wrote to him, saying that the job would undoubtedly “both please and displease pretty much every faction of America.” Surprising no one, Paine turned it down. He thought that it would be the most political job in all of Washington. (The appointment eventually went to John Love, the moderate Republican governor of Colorado, who was very popular in the western states for championing the protection of the environment.)
It was still early in 1973 when Paine finally landed in Moscow; it was his first time in the Soviet Union. For this important company occasion, General Electric needed someone with name recognition who had more than just a cursory experience dealing with the Russians. When Reginald Jones called on him, he said yes.9 He was happy to go. (As he later recalled in a lighter moment, it finally gave him a chance to use the bit of Russian that he had learned years ago at Stanford.)
On January 12, 1973, on behalf of GE, he signed a landmark agreement with the USSR Council of Ministers’ State Committee for Science and Technology.10 The industrial accord brought the two adversaries together for one of the first large-scale, global cooperative efforts in the midst of détente. The synergy would go a long way to jointly advance each nation’s electric power generation capability. The timing of the accord was not accidental. It came at a time when Soviet-American relations were just starting to thaw. Just two weeks later, the Paris Peace Accords would end official US involvement in Vietnam. The Soviets wanted the accord badly. They gave Paine and his delegation a very warm reception and dinner after the ceremony.
He was spearheading a historic agreement. It allowed the two adversaries to exchange specialists and equipment and to share the results of their research. For the first time since before World War II, the State Department allowed the doors to be opened for a large-scale commercial venture. Soviet engineers could visit GE facilities across the US and Americans could visit power stations in the Soviet Union. The pooling of talent helped both sides. A solution was needed to meet the anticipated demands for much higher power consumption for both sides. Besides providing a working basis for exchange of technical data, he hoped that the agreement would quicken the pace of research and development in both countries while broadening its reach. The cooperation benefited both sides, since they did things differently. The Soviets tended to prototype at the earliest date possible, often disregarding cost. The Americans, on the other hand, preferred to try experimental designs until a more economical solution was obtained.11
After Paine returned to the US, the White House and State Department claimed victory. It was front page news. President Nixon praised the GE initiative from the Rose Garden, even as newspaper editorials blasted the company’s motives, on top of accusations of corporate greed.12
GE was also a major player in the Far East. The potential returns from the Asian market were especially lucrative for the Power Generation Group. Paine worked very closely with Hoyt P. Steele, the vice president and general manager of the GE International Sales Division, to develop a strategic marketing plan. Together, after months of negotiations in 1971 and 1972, they secured a long-term manufacturing and service agreement with the Taiwan Power Company. Taipower, as it is known throughout East Asia, was a pioneer. It went from zero capability in the years after World War II to become one of the leading indigenous electrical power companies in the world. In that time, modern electrical power totally transformed the Chinese island republic off the coast of mainland China. By 1970, it had become a leading global exporter of everyday consumer goods—everything from tennis shoes to portable radio sets.13
The negotiations delighted Paine. The landing on the moon had just captured the imagination of the island’s people. It had garnered him a reputation as the mysterious phantom behind the success of Apollo. From his days in the Pacific, he had had an affinity for Asian culture and its unique elegance. This sense only deepened after he worked with Republic of China Vice President Yen Chia Kan. On a personal level, he became deeply fascinated with the wisdom of the traditional Confucian analects. When Yen found out, he had them translated and sent to Paine. Among his favorite was a saying that he perhaps thought described himself. He wrote it down in illuminating cursive: “Is he not a man of complete virtue who feels no discomposure, though men may take no note of him?”14
One business area that he grew was GE’s renowned industry training program. For decades, the company had sponsored international training, inviting engineers from other countries to America, and in exchange, sending its own engineers overseas. Skilled people came to train and work at locations across the country. Locally recruited and trained by GE, workers became proficient electrical technicians, construction supervisors, and site managers. Puerto Rico had hosted the first program. The US territory was, at the time, struggling to convert third-world agricultural laborers into skilled workers. The higher-technology industrial tasks needed an infusion of new talent. The program steadily grew from there. Under Paine, the Power Generation Group greatly expanded the program. Citizens from many nations, including the Republic of China, Japan, the Philippines, Honduras, and Mexico, came to the United States for training. It was a good business development move and one that he promoted enthusiastically with yearly trips abroad to each of the partner countries.15
Five months after his breakthrough with the Soviet Union, General Electric promoted him to senior vice president for technical planning and development. It made him the fourth-ranking executive in the company. The title meant that GE now looked to him to understand and predict the effect of near- and long-term developments in the rapidly changing global world of high-tech. The much broader role affected all GE business groups, from aircraft engines to nuclear reactors to home appliances and even Christmas lights.
Chairman and CEO Reginald Jones had given him the position based mainly on the strength of his ability to do long-range planning. In his new job, he had to do one thing very well: forecast the market and recommend a direction for the company.
The situation at GE in the mid-1970s was not unlike that of many large enterprises trying to survive in a time of global economic recession. Investment was low, inflation was high, and the unemployment rate was approaching 10 percent. Because of short-term pressures on financial returns, attention at the top of the company had for years been directed mainly at just the next few fiscal quarters. A comprehensive, long-range strategy for the company as a whole was not very well defined—nor was it greatly desired, as he found out. He told Jones of his surprising find, that there was “a near consensus among our executives that a corporate strategic plan for a diverse company like GE is neither possible nor desirable.”16
Why was GE struggling? He came up with not one but a handful of reasons. Foremost among them was the fast-increasing prominence of liberal social reform ideology and environmental activism that had begun a decade earlier. There was also a new scrutiny of the government; the Watergate scandal was a catalyst but it was not the only one. The national media had turned on large businesses with stories of greed and corruption. Lastly, Communist bloc nations were entering the free world trade market for the first time. All of these adversarial factors turned the social and political climate of the country against big businesses.17
The situation was even tougher on GE because it had heavy ties to Washington and the defense lobby. Paine believed that the company had been too slow to adapt to the changing times and not selective enough in how it used its resources. Available capital was becoming more and more limited. It was impossible for the company to grow. Later that year, he met with Jones and the board at a retreat at the company’s new headquarters in New Canaan, Connecticut. Jones wanted to focus on the long-term growth of GE. But Paine was frank with him. Before that could happen, GE must “batten down the hatches” and learn, as NASA did, to operate in a transparent, very public fishbowl.
The following spring, Paine led a complete, top-down review of the strategic plan and the entire management structure of the company. The exhaustive analysis took up the better part of 1975. It was a challenging task. He directed the other executives to take a long, over-the-horizon look at the technology trends and sociopolitical climate confronting the company. Could GE start to adapt so it would be in a better position to grow going into the 1980s? And if so, would it? He gambled and was boldly direct with the CEO, asking Jones, “How will we manage GE to achieve?”18 He had put himself in an unenviable position. In January 1976, he had a sit-down with Jones and the Board of General Electric and pointed out to them what he believed were long-standing cultural shortfalls and problems with the company, along with his recommendations.
Then he resigned and left the company.
Tom Paine wanted to be a chief executive. After twenty-five years at General Electric, Jones was not going to give him that opportunity. He did not make Jones’s short list of handpicked candidates in the CEO’s carefully crafted and complex succession plan.19 The previous fall, he had put his name in with several executive personnel consulting firms. He had put down in writing exactly what he wanted: an opportunity to be a “CEO of a major enterprise requiring technological, operating, and international leadership, and in which high-level business and government experience would be valuable.”20
On November 22, 1975, he received a call from the executive selection firm of Heidrick and Struggles. They wanted to know if he would like to meet with the management board of the Northrop Corporation in southern California.21 Since it was right before Thanksgiving, he told them he would fly to Los Angeles after the holiday. On Monday, December 1, he met with the company’s senior executives at the California Club in downtown Los Angeles. They got straight to the point: Northrop wanted Paine as their president and chief operating officer.
With 26,000 employees and $2 billion in annual sales, Northrop was one of the largest defense contractors in the US.22 Founded by aeronautical engineer Jack Northrop in 1939, the aerospace powerhouse was famous for its line of legendary warbirds dating back to World War II. In 1944, it had introduced the P-61 Black Widow, the first radar-equipped night fighter to enter service in the Pacific. Other aircraft followed, including the first all-weather strategic interceptor, the F-89 Scorpion, squadrons of which the Air Force stationed in Alaska as the country’s first line of defense against Soviet first strike nuclear-capable bombers. The revolutionary YB-49 Flying Wing would lead to the development of the B-2 Spirit strategic stealth bomber four decades later in the 1980s. And the T-38 Talon, still the most successful jet trainer of all time fifty-six years after its introduction.
The Northrop Corporation especially wanted his experience in the overseas market. The company had been trying to regain its reputation in the foreign sales establishment after the troubling events of 1974. That year, the fallout from the Watergate scandal had revealed that company president Thomas V. Jones had made an illegal contribution to the reelection campaign of Richard Nixon. The wrongdoing had made some news as part of the Watergate coverage, but the subsequent congressional investigation made headlines. A much more egregious impropriety was revealed. It showed that the company had paid some $30 million in bribes to government officials from Indonesia, Iran, and Saudi Arabia in an effort to secure foreign sales of military hardware. A class action lawsuit was filed against the company. The court ruling forced Jones to step down as president of Northrop. It also stipulated that a new president be named by July 1976.
On February 18, 1976, the board named Paine the president and chief operating officer of the Northrop Corporation. He had no connection to the scandal, and the board of directors brought him in to repair the damage.
The company was trying to establish its F-20 Tigershark program, and was having great difficulty doing so. The fighter aircraft was designed by the company to compete exclusively on the foreign export market. Based on Northrop’s venerable F-5 fighter that first entered service in 1962, it was equipped with the latest in electronics, radar, weapons systems, and engine technology. But to make the aircraft, various parts of the company had to come together and operate more fluidly. Paine had to ensure that they operated seamlessly as a single entity.
Every division and subsidiary of the corporation reported directly to him. This provided him a panoramic view of the state of the company. He began to identify areas of weakness and strength and those where he thought strides still had to be made. The key was to have one operating model that could be implemented across all divisions of Northrop. This was central to his plan to unify the company. As each division executed its operating plan, he made sure that it was aligned with the central corporate plan.23
He created a five-year schedule with quarterly milestones that could sustain Northrop in the midst of the government’s draconian cuts in aerospace and defense. Under President Jimmy Carter, the period from 1977 through 1980 was extremely lean for defense contractors. Northrop was one of the hardest hit in the industry, along with Southern California in general. Using his plan, by 1980 the company would be in a position to pursue the new, large procurement contracts that were expected to come out of the Defense Department under a new administration in Washington.
But on March 1, 1982, Paine stepped down and left Northrop. He believed that he had fulfilled his obligation to the board of directors that had hired him and the six-year contract he had signed. Under him, the company had more than turned the corner. Most of the weaknesses that he had identified had been rectified. Reforms central to the common operating model that he had developed had been implemented at various levels throughout the company. And most notably, Northrop had defeated its chief competitor, Lockheed, to win the highly coveted prime contract to build the B-2 Spirit stealth bomber—still the most advanced and only operational, low radar visibility strategic bomber in the world today. The company’s growth was unprecedented. Dun’s Business Month would name it one of the five best-managed companies in America.
As he sat gazing out the window at the busy highway to Santa Monica, not far from downtown Los Angeles, the box that he had been waiting for finally arrived. It had only been a couple of weeks since he stepped down from running the Northrop Corporation. He was still setting up his new office when the package from the printer came in. It was the ten boxes of stationary he had ordered a few weeks back. Opening the box, he saw the letterhead that he’d designed neatly printed on heavy sheets of letter paper:
Thomas Paine Associates
High Technology Enterprises
The small embossed, well-known picture of Buzz Aldrin’s boot print on the moon at the top of the letterhead looked quite attractive. It was a nice touch, he thought. He sat down, pulled out one of the sheets and began writing. He now had ample time to do what he relished most: chart a way to the stars.